Malaysia falls behind Singapore, Vietnam and China in attracting FDI and is far from becoming the new Asian metropolis; FDI dropped from $5.5 billion in 2001to $3.9 billion in 2006
Kuala Lumpur: Malaysia has embarked on a huge development plan to spread growth and jobs to its Malay-majority hinterlands, but analysts said it faced tough competition for necessary foreign investment.
Prime Minister Abdullah Ahmad Badawi last month launched a $51billion (Rs2040 crore) development initiative to cut poverty in northern Peninsula Malaysia, the country’s Muslim heartland.
He had already unveiled the Iskandar Development Region in southern Johor state, which aims to attract $14.2 billion over five years to turn the area into a new Asian metropolis.
However, other Asian nations like China, India and fast-growing Vietnam were luring away key foreign investment, analysts said.
Only one-third of the targetted $51billion for Peninsula Malaysia is due to come from the government, so foreign funds are required for the plan to succeed, said Wan Suhaimi Saidie, an economist with K Kenanga Bhd.
“But now we are facing stiff competition from Thailand and Vietnam. These countries have advantages over Malaysia, for instance in the form of a younger workforce or bigger population,” he said.
Chua Hak Bin, an economist with the Singapore-based firm Citigroup Global Capital Markets, also said attracting more overseas money would be hard.
“Malaysia has really fallen behind Singapore, Vietnam and China in attracting foreign direct investment,” Chua said. Part of the reason could be China’s popular free trade zones and Singapore’s relatively low corporate taxes.
Officials have embarked on a marketing offensive in Singapore to sell the Iskandar Development Region, but so far it has not attracted major foreign investment.
Malaysia, Southeast Asia’s third largest economy, has seen foreign direct investment steadily declining. In 2006 it amounted to an estimated $3.9 billion compared to $5.5 billion in 2001.
Analysts said Abdullah’s ambitious development project would still have an impact, creating new job opportunities across a variety of sectors over the next few years.
“New employment opportunities will be created with the development of the country’s hinterlands,” Lee Heng Guie, head of economic research with CIMB Investment Bank, told AFP.
“With infrastructure development taking place, like the second bridge link to the island resort of Penang, there will be a rise in demand for building materials,” he said. Some analysts have speculated that the development plans were announced recently because Abdullah plans to hold early an early election, possibly later this year.
He was hoping to boost his government’s popularity by trying to spread economic growth across the country, they said. The plans were “highly politically motivated” ahead of an anticipated early election, Citigroup’s Chua told AFP.
Malaysia official economic growth forecast for 2007 is 6%, behind that of rivals like China and India while its economy grew 5.9% in 2006.
Also, in the news:
Alleged Port Debt in Malaysia Stirs Scandal
August 22, 2007
KUALA LUMPUR, Malaysia -- Authorities are facing a scandal over alleged debts of more than $1 billion incurred by the country's main port authority, sparking concerns about a possible government bailout, politicians said yesterday.
The issue is politically sensitive for Prime Minister Abdullah Ahmad Badawi -- widely expected to call for general elections before mid-2008 -- because he has repeatedly pledged to boost transparency and battle the financial mismanagement that has plagued high-profile Malaysian projects in the past.
Mr. Abdullah said last week he needed more details and declined to comment on media reports saying the Port Klang Authority had racked up debts totaling about 4.6 billion ringgit ($1.3 billion) because of problems with the Port Klang Free Zone, a much-hyped shipping area that opened in western Malaysia last year.
Fears mounted that troubles with the shipping zone could hurt investor sentiment after the Dubai-based Jebel Ali Free Zone Authority said last month it was pulling out of a pact to manage the zone due to what it called strategic reasons.
"The PKFZ scandal has affected the confidence of both foreign and local investors. They are watching the matter very closely," said Ronnie Liu, an official in the opposition Democratic Action Party. He has asked police to investigate land-deal irregularities and cost overruns that are believed to have triggered the debts.
Port Klang Authority Chairman Chor Chee Heong said he was busy with meetings and declined to comment.
Shahrir Samad, the chairman of a parliamentary committee that looks into government accounting and fund allocations, said his panel is likely to look into the issue because it might involve public-accountability concerns.
"Is there [going to be] a bailout? If it involves government funds, we just want to find out what has happened," said Mr. Shahrir, a member of Mr. Abdullah's ruling coalition.
Several government bailouts of prominent companies, including a bank and a steel firm, damaged public confidence in the 1990s. Opposition leaders blamed the bailouts on corruption as well as undisciplined spending by former Prime Minister Mahathir Mohamad, whose 22 years in power were marked by expensive modernization initiatives.
Mr. Abdullah succeeded Dr. Mahathir in 2003 and said he wouldn't follow on the path of costly projects. The government said last year it had spent more than 11 billion ringgit since 2001 to rescue ailing companies, including Malaysia's national airline, rail and highway networks, and other infrastructure projects.
Copyright © 2007 Associated Press
NCER, IDR, Eastern Corridor, whaccathingamajiggy-er, etc. Mari, mari labur! Kenapa, tak percaya kah?